Tax Audit Report for Charitable Trusts Needs Simplification, Says Principal Chief Commissioner, ETCFO
Income Tax Department’s Exemptions wing, Principal Chief Commissioner Debjyoti Das on Tuesday stressed on the long-standing pain points around non-profit organisations (NPO) tax audits and registration, promising tangible simplification as India prepares to implement the new Income Tax Act 2025 from April 1, 2026.
Speaking at PHDCCI’s interactive session on “Taxation of Charitable Institutions & Exempt Entities”, Das spoke about the challenges faced by non-profits, tax professionals and departmental officers alike, Das said the current tax audit report for NPOs is “rather complex” and “cannot be at par with a business audit report”.
Das was responding to a concern highlighted by Mukul Bagla, chair direct tax committee, PHDCCI, who said that audit Form 10B and 10BB are now so detailed that filing them feels like doing an assessment. “Trusts don’t have the budgets of corporates, and certifying highly subjective facts becomes very difficult for chartered accountants,” Bagla said.
In response Das noted that excessive complexity often leads to delays in filing, which in turn results in high tax demands and repeated condonation petitions. “Very often the tax audit report does not get filed on time, that leads to more problems because you end up with high tax demands, and we end up doing the work of condoning,” he said.
Das emphasised that the department is committed to simplifying this process substantially. Even for condonation petitions, he said the department is working to create a structure where the facts are “so obvious” that decisions can be taken in a few days, instead of months. “We understand that simplification is an ongoing exercise. I am very keen that we should do something to simplify the process,” he added.
NPO re-registration framework will be eased
A second major area of concern is the NPO registration and re-registration framework, which saw a fundamental overhaul in 2021 when perpetual registrations were discontinued.
Bagla said that the shift to five-year and ten-year registrations under 12A and 80G has become a major administrative hassle for genuine charitable organisations. “While the intent is right, the renewal scrutiny process must be seamless and triggered only when there is suspicion of bogus transactions,” Bagla added.
Responding to the concerns, Das said that while mandatory re-registration every five years brought accountability, it also led to administrative bottlenecks this year as a large volume of applications came due simultaneously.
Acknowledging the pressure Das stressed that the department is working to ease the process. He said that the industry’s suggestion that only cases showing high risk or discrepancies should be escalated for full scrutiny is valuable.
“We are working towards that, we will try and ease the difficulty of the registration process as much as possible,” he said. At the same time, he reiterated that not all trusts operate above board, and the department will continue a calibrated verification approach. “Our first response is that we trust our taxpayers, but we will also verify,” he said, adding that scrutiny will not be uniform for everyone but risk-based,” Das added.
